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Read more: CondoTek executive: New condo rules “difficult to swallow”
Because of that risk, Horne said Fannie Mae is making many of those temporary provisions permanent as part of its recently updated policies to address projects in need of critical repairs, projects that have material deficiencies (such as significant deferred maintenance), and special assessments for projects consisting of five or more attached units.
Fannie will now require developers to disclose needed critical repairs and significant deferred maintenance that may impact the safety, soundness, structural integrity, or habitability of a condo or co-op unit or the overall project and its amenities.
Additionally, the GSE will not purchase loans secured by units in condo and co-op projects requiring critical repairs or that have unresolved significant deferred maintenance until the required repairs are made. Fannie Mae has also adopted a policy requiring lenders to evaluate special assessments, including the reason for the assessment and the ability of unit owners to make timely payments for the assessment.
“Our updated condo and co-op requirements are designed not only to protect lenders and Fannie Mae from a risk management perspective, but also to protect borrowers from physically unsafe or financially unstable projects, which could translate to significant spikes in homeownership costs,” Horne wrote in a blog post released on Fannie’s website. “Together, these policies promote safe and sustainable homeownership.”
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